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Sinopec (SNP) Jumps More Than 13% on Q3 Earnings Improvement

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China Petroleum & Chemical Corporation (SNP - Free Report) , also known as Sinopec, reported third-quarter 2020 earnings per American Depositary Receipt (ADR) of $5.54, improving from the year-ago quarter earnings of $1.41. The higher profit was owing to lower exploration expenses, offset partially by lower contributions from upstream and refining businesses.

Revenues, however, declined 28.2% year over year to $75,209 million.

Notably, following higher third-quarter earnings, the stock has gained more than 13% since the earnings announcement on Oct 28.

Operational Performance

Exploration and Production: During the nine-month period ending Sep 30, 2020, Sinopec’s crude oil production decreased 1% year over year to 210.65 million barrels. Although oil production in the domestic market remained flat, overseas volumes slipped 8.2% year over year to 23.96 million barrels.    

Natural gas volumes decreased 0.2% year over year to 772.14 billion cubic feet in the same period. Also, total oil and gas production fell 0.7% year over year to 339.39 million barrels of oil equivalent.

For the nine-month period ending Sep 30, the company’s average realized oil price slipped to $38.24 per barrel from $58.82 a year ago. Realized natural gas price also plunged 14.1% from $6.19 per thousand cubic feet to $5.32.

Notably, segmental operating loss for the first nine months of 2020 was recorded at 6,479 million yuan against operating profit of 8,718 million yuan in the year-ago period due to lower production and realized commodity prices.

Refining: The company’s Refining business recorded refinery throughput of 174.46 million tons (down 6.3% year over year). It also produced approximately 105.19 million tons of petroleum products, which represents a 12% decline from the first nine months of 2019.

Due to lower throughput volumes, the segment reported operating loss of 15,098 million yuan versus the year-ago profit of 22,500 million yuan.

Marketing and Distribution: The Marketing and Distribution segment sold 162.25 million tons of refined oil products, which reflects a 15.7% year-over-year decline.

From this segment, the company generated operating profit of 16,958 million yuan, down 27.1% from the year-ago period’s 23,245 million yuan owing to lower sales volume of refined oil products.

Chemicals: During the nine-month period ending Sep 30, 2020, the production of ethylene decreased 4.8% year over year to 8,850 thousand tons from 9,295 thousand tons.

However, production of Synthetic resin was 12,773 thousand tons as compared with 12,749 thousand tons in the year-ago period.

Notably, the segment recorded an operating profit of 7,047 million yuan for the first nine months of 2020, down 57.4% year over year owing to lower production volumes of ethylene.

Operating Expenses

The company saw total third-quarter 2020 operating expenses of 493,842 million yuan, lower than 715,107 million yuan a year ago. Particularly, the integrated energy major reported exploration expenses, including dry holes, at 1,644 million yuan, suggesting a decline from 2,276 million yuan in the year-ago quarter.

Capital Expenditure

Capital expenditures in the first nine months of 2020 totaled 71.858 billion yuan. Out of this, 32.172 billion yuan was spent on exploration and production projects. Sinopec spent 13.819 billion yuan on the Refining segment, while the Chemical segment was allocated 10.458 billion yuan. The company had set aside 13.768 billion yuan for the Marketing and Distribution segment.

Zacks Rank & Key Picks

Sinopec currently has a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include PDC Energy Inc. (PDCE - Free Report) , Matador Resources Company (MTDR - Free Report) and Antero Resources Corporation (AR - Free Report) . While PDC Energy sports a Zacks Rank #1 (Strong Buy), Matador and Antero carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

PDC Energy is likely to see earnings growth of 13.3% in 2020.

Matador has seen upward estimate revisions for its 2020 bottom line in the past 30 days.

Anterohas seen upward estimate revisions for 2020 bottom line in the past 30 days.

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